If you’ve read Gorton, this is the next step, by Zoltan Pozsar. It emphasizes demand-side motives, from large corporate and financial cash holders, for finding something safer than deposits, given the cap on the FDIC guarantee. Here is one bottom line:
…if institutional cash pools continue to rely on banks as their credit and liquidity put providers of last resort, the secular rise of uninsured institutional cash pools relative to the size of insured deposits is going to make the U.S. financial system increasingly run-prone, not unlike it used to be prior to the creation of the Federal Reserve and the FDIC…
Another bottom line, my interpretation rather than any direct claim of the author, is that financialization of the economy, combined with some stagnation on the real side, may have led to permanently low rates on T-Bills, given their value as collateral. Maybe that is what low rates of interest are telling us.
For the pointer I thank Jeff Downing.